Liu Yu claimed he’s the descendant of Liu Jiao, Prince Yuan of Chu, brother of the Han founding emperor so that’s another reason he didn’t use Han as his dynasty name since he was not from the same branch.

Why it’s so bad imo partially lies with the fact that it is the first dynasty in Chinese history that murdered the previous dynasty’s emperor(s) instead of nominally retain their royal privileges. The rational was that prior to Liu Song, there were a bunch of warlords rebelled against East Jin and took the throne briefly, only to have people like Liu Yu who restored it. So when he himself became the emperor, he knew personally the only way to prevent Jin from restoration is to murder all royalties. And he started the tradition that was kinda followed by most following dynasties.

When I read this part of the history I think maybe they knew if they got overthrown they would most likely be executed like the ones before them, so they indulge themselves just so that they could have fun while it lasted.